The GST Council may consider removing the independent power of GST officers to arrest taxpayers under the CGST Act as part of a wider move to decriminalise GST enforcement. If approved, arrests in serious fraud cases would require judicial/criminal-law intervention, while tax recovery, interest and penalties would continue as usual.
The GST Council is expected to consider a major reform in tax enforcement that could remove the power of GST officers to directly arrest persons accused of specified GST offences. The proposal is likely to be taken up at the Council's meeting scheduled for October 7, 2026 as part of the government's next phase of GST reforms.
At present, Section 69 of the Central Goods and Services Tax Act, 2017 empowers the Commissioner, where prescribed conditions are satisfied and there are reasons to believe that specified offences under Section 132 have been committed, to authorise a central tax officer to arrest the person concerned. This statutory power currently operates without first obtaining an arrest warrant from a court.
Under the proposal now under discussion, this standalone arrest power available to GST authorities may be removed. In serious cases involving intentional fraud, fake invoicing, fraudulent Input Tax Credit or deliberate tax evasion, criminal proceedings could still continue, but arrest would be routed through the judicial/criminal-law process rather than being independently authorised by GST officers.
The proposed reform is reportedly aimed at addressing long-standing concerns from businesses and industry regarding the use of coercive enforcement powers in tax disputes. The government is examining a more recovery-focused and proportionate enforcement framework, with criminal prosecution concentrated on deliberate and serious fraud rather than routine or interpretational disputes.
Importantly, removing arrest powers would not mean that GST violations become consequence-free. Authorities would continue to retain their powers to recover unpaid tax, demand interest and impose applicable penalties. Wrong availment of ITC, short payment of tax and other violations could therefore continue to attract proceedings and financial consequences under the GST law.
Serious fraudulent activities would also continue to remain exposed to criminal prosecution. The key proposed change concerns who can initiate an arrest and through what procedure, rather than granting immunity for GST fraud.
According to The Indian Express, central GST formations dealt with 72,393 GST offence cases between FY 2021-22 and FY 2024-25, involving 887 arrests. Business groups have over the years raised concerns that arrest provisions can sometimes create fear or be used disproportionately during investigations.
The government is also considering wider decriminalisation of GST offences, including rationalisation of prosecution provisions and greater reliance on technology, GSTN data analytics and financial penalties for detecting and addressing non-compliance. Several related procedural reforms concerning ITC, refunds, registration and penalties are also expected to be discussed by the Council.
However, even if the GST Council approves the proposal, the change will not become effective immediately. Since the arrest power is contained in the CGST Act itself, amendments to the law would be required. Reports indicate that the necessary legislative changes could subsequently be placed before Parliament.
Accordingly, GST officers continue to possess their existing statutory arrest powers as of now, and taxpayers should not treat the proposal as an already-notified legal change. CA Sansaar